The US House of Representatives’ Committee on Financial Services sits at the crossroads of private equity and government, serving as a gatekeeper for legislation that affects how the industry is governed. From an industry standpoint, it wouldn’t hurt if some of its members are friendly.
Congressmen holding seats on the committee received at least $35,000 in political contributions from the Private Equity Growth Capital Council’s political action committee for the 2012 election, according to Federal Election Commission documents. The committee’s chairman, Republican Spencer Bachus, received $10,000 from the PEGCC PAC for his reelection campaign. The campaign of fellow committee member and Republican Representative Robert Hurt also received $10,000 from the group’s PAC.
The Private Equity Growth Capital Council will continue to support candidates who understand the critical role private equity investment plays in driving economic growth
In May 2011, Hurt sponsored legislation that exempts private equity firms from registering with the US Securities and Exchange Commission. The Small Business Capital Access and Job Preservation Act was approved by a Financial Services subcommittee 19 to 13 – with only one Democrat breaking ranks in support of the legislation. That Democrat, Jim Himes of Connecticut, received a $2,500 donation from the PEGCC PAC for his reelection campaign in October.
The bill eventually made it through the Financial Services committee with bipartisan support, sources said.
The Small Business Capital Access and Job Preservation Act was one of a handful of bills targeted specifically by the PEGCC, according to a first quarter disclosure report. In addition to Hurt’s bill, the industry group also focused its political efforts on the Jumpstart Our Business Startups Act, an industry-friendly piece of legislation that eliminated certain fund marketing restrictions.
It is almost impossible to determine the extent to which political donations truly influence policy formation. However, the bulk of these donations were made in 2011 or early 2012 – prior to the passage of the JOBS Act.
The congressional offices and reelection campaigns of Bachus, Hurt and Himes did not respond to requests for comment at press time.
The contributions to Himes, Bachus and Hurt are only a fraction of the more than $80,000 the PEGCC PAC has contributed to reelection campaigns, on top of at least $77,500 donated to other political action committees dedicated to the 2012 election cycle as of 30 April, according to FEC documents.
PACs typically represent corporations, unions, industries or individuals, and are structured to collect and distribute political contributions to causes and candidates. But their political clout isn’t limited solely to contributions. Earlier this year, a political action committee supporting former Speaker of the House Newt Gingrich produced a widely-publicised video attacking Mitt Romney in an effort to discredit his record at Bain Capital.
Candidates backed directly by the PEGCC’s PAC, all of whom are incumbents, tend to be members of committees that oversee and craft legislation affecting the industry. Beyond the Financial Services Committee, the PAC has also donated at least $15,000 across three congressmen serving on the House Ways and Means Committee, which handles tax issues, according to the FEC.
The Carried Interest Tax Fairness Act of 2012, also cited in the PEGCC’s disclosure report, is being considered by Ways and Means. That legislation, which is sponsored by Democratic Representative Sander Levin, would tax carry at the same rate as income (excluding capital committed by the GP to the investment vehicle).
In addition to influential committee members, the PEGCC PAC has also made political contributions to some of the most powerful members of Congress. Representative Eric Cantor, the House majority leader, received $5,000 for his reelection campaign. Cantor has been a vocal opponent of raising taxes, and discussions surrounding carry’s tax treatment were reportedly what drove Cantor to exit talks with Vice President Joe Biden during the debt ceiling crisis last July, according to a Washington Post report.
Cantor’s congressional office did not respond to a request for comment.
THE OTHER PACs
Political fundraising is not just limited to candidates’ campaigns. Almost half of the PEGCC PAC’s political contributions go to other political action committees, which then distribute that money to campaigns or other PACs.
This includes at least $20,000 to both the National Republican Congressional Committee and the National Republican Senatorial Committee, both of which are dedicated to maintaining or increasing the number of seats held by Republicans in Congress.
Although the PEGCC PAC is not officially affiliated with either party, its contributions are decidedly right leaning. Of the $160,000 in itemised contributions listed by the FEC, $112,500 was dedicated to Republican candidates or affiliated PACs compared to only $47,500 for Democratic entities.
The Democrats and Democratic-leaning PACs that did receive contributions tend to be moderates or “Blue Dog” party members who are known for voting with conservatives on certain fiscal policy matters.
“The Private Equity Growth Capital Council has and will continue to support candidates who understand the critical role private equity investment plays in driving economic growth by investing in promising companies in all 435 congressional districts and all 50 states,” said PEGCC spokesman Noah Theran.
The PEGCC declined to comment further on its PAC’s political contributions.